When is Refinancing Worth it?

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Some have said that only in the case your new interest is at least 2 points lower, should you refinance your mortgage. That may have been accurate years ago, but with refinancing dropping in cost in recent years, it's never the wrong time to think about a new mortgage loan! A refinanced mortgage can be worth its cost several times over, factoring in the benefits that come, in addition to a lower interest rate.

Benefits from Refinancing

When you refinance, you may have the ability to lower your interest rate and monthly payment amount, perhaps considerably. You may also be able to "cash out" a portion of your equity, which you may use to take care of higher interest debt, improve your home, or plan a vacation. You could have the option to refinance to a shorter-term mortgage loan, enabling you to build up your home equity quicker.

Expenses and Fees

All of these benefits do come with some expense, though. When you refinance, you are paying for a lot of the same things you paid for at the time you got your current mortgage loan. These probably include settlement costs, an appraisal, lender's title insurance, underwriting expenses, and others.

Doing the Math

Paying discount points can help you attain a better interest rate. When you pay (on average) 3% of the loan amount at the start, your savings for the term of the refinanced mortgage can be great. We recommend that you consult a tax professional before acting on advice that any paid points may be deducted on your taxes.

Another cost that borrowers may consider is that a reduced rate of interest will reduce the interest amount you will be able to deduct from your federal income taxes. Call us at 701.222.0100 to help you do the math.

Most people find that the savings per month outweigh the initial expenses of a refinance. We can help you explore your options, considering the effect a refinance could have on your taxes, how likely you might be to sell in the next couple of years, and your cash on hand. Call us at 701.222.0100 to get you started.

Curious about refinancing? Call us: 701.222.0100.

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